1.7m tax returns overdue

A staggering 1.7m tax returns remain overdue since the introduction of self-assessment, the Inland Revenue admitted this week.

Although the taxman hailed the increase earlier this year in the number of returns filed online, the number of taxpayers who fail to get their forms in on time remains stuck at around 900,000.

And hundreds of thousands of returns, some of which are up to seven years overdue, have still not been handed in, figures provided to This Is Money reveal.

Almost 30,000 returns remain outstanding for 1996/97, the first year for which the self-assessment regime was introduced. The figures have climbed steadily for every year since - rising to 200,430 for 2000/1, 342,894 in 200 1/2 and 342,894 in 200 1/2.

Some 893,690 returns missed the 31 January deadline this year, according to figures from the Inland Revenue.

Tax advisers say the figures are a damning indictment of the system and proves there is a 'serious problem' that the taxman needs to be tackling.

Although the Inland Revenue does run nationwide campaigns to remind people of the filing deadlines, the advertising is 'clearly not working' and needs a 'thorough rethink', accountants say.

John Whiting, personal tax partner at the accountants PWC and a former president of the Chartered Institute of Taxation, said the continued high level of non-filing revealed a problem that needed to be addressed.

He added: 'There must be something wrong if 10% of taxpayers can‘t do basic compliance. I‘d love to find out why it is that people can‘t get their forms in on time.

'I‘d also like to know why the Revenue doesn‘t spend money here rather than funding fatuous TV adverts. If you‘re going to file, you‘ll file. I think it would be more sensible for the Revenue to look at why others aren‘t doing it.'

The Inland Revenue can levy an automatic £100 penalty against any taxpayer who fails to get their returns in on time. And it has the power to levy daily fines of £60 against hard-core non-filers, though these powers are rarely used.

Although the £90m windfall of automatic penalties might appear welcome, non-filing of returns causes administrative problems and backlogs of work at the Revenue which civil servants are keen to iron out.

Whiting said researching the problem could help the taxman draw up a strategy for tackling the problem of non-filing:

'If people are lazy, the penalties should be increased. If they don‘t understand the process, the Revenue needs to introduce more education for taxpayers. If it‘s too complex for people to understand, the process should be simplified.'

The taxman has already taken steps to simplify the tax return. Taxpayers who pay tax via the Pay As You Earn (PAYE) system and have a modest amount of savings and investment income will from this year have the option of filing a new, condensed four-page return.

This form must be returned by the end of September so the taxman can calculate any tax liability.

A Revenue spokesman said the taxman will only use its powers to fine late returners a £60 daily penalty if they are 'significant' offenders:

'Daily penalties are only being taken against those whose returns are outstanding for a significant period and also after we have contacted them in writing or by phone to give them a final opportunity to avail themselves of the help we have on offer and submit their outstanding returns.

'The Inland Revenue want the outstanding returns and tax, daily penalties are a last resort. There is no question of daily penalties being pursued on taxpayers who only have the current return for 2002/03 outstanding but are up to date with previous returns.'